Private equity and hedge fund firms have bought more than 100,000 troubled mortgages at a discount from banks and federal housing agencies, emerging as aggressive liquidators for the remains of the mortgage crisis that erupted nearly a decade ago.As the housing market nationwide recovers, this is a dark corner from which banks, stung by hefty penalties for bungling mortgage modifications and foreclosures, have retreated. Federal housing officials, for the most part, have welcomed the new financial players as being more nimble and creative than banks with terms for delinquent borrowers.But the firms are now drawing fire. Housing advocates and lawyers for borrowers contend that the private equity firms and hedge funds are too quick to push homes into foreclosure and are even less helpful than the banks had been in negotiating loan modifications with borrowers. Federal and state lawmakers are taking up the issue, questioning why federal agencies are selling loans at a discount of as much as 30 percent to such firms.One company has emerged as a lightning rod, criticized by housing advocates and lawyers for borrowers, but admired by investors: Lone Star Funds, a $60 billion private equity firm. In just a few years, Lone Star’s mortgage servicing firm, Caliber Home Loans, has grown from a bit player to a major force in the market for distressed mortgages.
As of the end of August, Lone Star and Caliber had foreclosed on at least 1,500 of those formerly F.H.A.-guaranteed mortgages — or 9 percent of the pool, according to an analysis of the home addresses performed by RealtyTrac, a foreclosure tracking service. Many of the foreclosed homes are clustered in Florida, Ohio, New Jersey, California and Texas.A majority of the homes foreclosed on by Caliber have been bought back by another Lone Star affiliate at either a trustee or sheriff’s auction. The private equity firm is looking to resell the homes, and many can be found on Zillow, an online real estate listing service.